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Supply Chain Risk

NGL Energy Partners LP Announces Second Quarter Fiscal 2021 Financial Results

NGL provides Adjusted EBITDA guidance that does not include certain charges and costs, which in future periods are generally expected to be similar to the kinds of charges and costs excluded from Adjusted EBITDA in prior periods, such as income taxes, interest and other non-operating items, depreciation and amortization, net unrealized gains and losses on derivatives, lower of cost or net realizable value adjustments, gains and losses on disposal or impairment of assets, gains and losses on early extinguishment of liabilities, equity-based compensation expense, acquisition expense, revaluation of liabilities and items that are unusual in nature or infrequently occurring. The exclusion of these charges and costs in future periods will have a significant impact on the Partnership’s Adjusted EBITDA, and the Partnership is not able to provide a reconciliation of its Adjusted EBITDA guidance to net income (loss) without unreasonable efforts due to the uncertainty and variability of the nature and amount of these future charges and costs and the Partnership believes that such reconciliation, if possible, would imply a degree of precision that would be potentially confusing or misleading to investors.

About NGL Energy Partners LP

NGL Energy Partners LP, a Delaware limited partnership, is a diversified midstream energy company that transports, stores, markets and provides other logistics services for crude oil, natural gas liquids and other products and transports, treats and disposes of produced water generated as part of the oil and natural gas production process.

For further information, visit the Partnership’s website at www.nglenergypartners.com.

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

(in Thousands, except unit amounts)

 

 

September 30, 2020

 

March 31, 2020

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

16,912

 

 

$

22,704

 

Accounts receivable-trade, net of allowance for expected credit losses of $3,399 and $4,540, respectively

439,889

 

 

566,834

 

Accounts receivable-affiliates

14,904

 

 

12,934

 

Inventories

182,859

 

 

69,634

 

Prepaid expenses and other current assets

74,150

 

 

101,981

 

Total current assets

728,714

 

 

774,087

 

PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of $619,820 and $529,068, respectively

2,799,725

 

 

2,851,555

 

GOODWILL

982,239

 

 

993,587

 

INTANGIBLE ASSETS, net of accumulated amortization of $706,259 and $631,449, respectively

1,538,417

 

 

1,612,480

 

INVESTMENTS IN UNCONSOLIDATED ENTITIES

21,215

 

 

23,182

 

OPERATING LEASE RIGHT-OF-USE ASSETS

168,349

 

 

180,708

 

OTHER NONCURRENT ASSETS

47,752

 

 

63,137

 

Total assets

$

6,286,411

 

 

$

6,498,736

 

LIABILITIES AND EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable-trade

$

379,420

 

 

$

515,049

 

Accounts payable-affiliates

23,985

 

 

17,717

 

Accrued expenses and other payables

138,572

 

 

232,062

 

Advance payments received from customers

24,143

 

 

19,536

 

Current maturities of long-term debt

13,123

 

 

4,683

 

Operating lease obligations

50,709

 

 

56,776

 

Total current liabilities

629,952

 

 

845,823

 

LONG-TERM DEBT, net of debt issuance costs of $22,267 and $19,795, respectively, and current maturities

3,275,166

 

 

3,144,848

 

OPERATING LEASE OBLIGATIONS

114,833

 

 

121,013

 

OTHER NONCURRENT LIABILITIES

105,835

 

 

114,079

 

 

 

 

 

CLASS D 9.00% PREFERRED UNITS, 600,000 and 600,000 preferred units issued and outstanding, respectively

551,097

 

 

537,283

 

 

 

 

 

EQUITY:

 

 

 

General partner, representing a 0.1% interest, 128,901 and 128,901 notional units, respectively

(51,518

)

 

(51,390

)

Limited partners, representing a 99.9% interest, 128,771,715 and 128,771,715 common units issued and outstanding, respectively

1,242,676

 

 

1,366,152

 

Class B preferred limited partners, 12,585,642 and 12,585,642 preferred units issued and outstanding, respectively

305,468

 

 

305,468

 

Class C preferred limited partners, 1,800,000 and 1,800,000 preferred units issued and outstanding, respectively

42,891

 

 

42,891

 

Accumulated other comprehensive loss

(307

)

 

(385

)

Noncontrolling interests

70,318

 

 

72,954

 

Total equity

1,609,528

 

 

1,735,690

 

Total liabilities and equity

$

6,286,411

 

 

$

6,498,736

 

NGL ENERGY PARTNERS LP AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, except unit and per unit amounts)

 

 

 

 

 

Three Months Ended September 30,

 

Six Months Ended September 30,

 

 

2020

 

2019

 

2020

 

2019

REVENUES:

 

 

 

 

 

 

 

 

Crude Oil Logistics

 

$

466,841

 

 

$

641,152

 

 

$

742,880

 

 

$

1,357,312

 

Water Solutions

 

88,678

 

 

101,249

 

 

176,743

 

 

173,032

 

Liquids and Refined Products

 

612,324

 

 

1,061,671

 

 

1,092,322

 

 

2,145,364

 

Other

 

315

 

 

264

 

 

628

 

 

519

 

Total Revenues

 

1,168,158

 

 

1,804,336

 

 

2,012,573

 

 

3,676,227

 

COST OF SALES:

 

 

 

 

 

 

 

 

Crude Oil Logistics

 

386,771

 

 

569,699

 

 

604,328

 

 

1,218,939

 

Water Solutions

 

579

 

 

(6,496

)

 

5,279

 

 

(9,303

)

Liquids and Refined Products

 

577,086

 

 

1,025,565

 

 

1,031,422

 

 

2,068,597

 

Other

 

454

 

 

435

 

 

908

 

 

900

 

Total Cost of Sales

 

964,890

 

 

1,589,203

 

 

1,641,937

 

 

3,279,133

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

Operating

 

56,054

 

 

74,886

 

 

121,041

 

 

136,198

 

General and administrative

 

17,475

 

 

43,908

 

 

34,633

 

 

64,250

 

Depreciation and amortization

 

87,469

 

 

63,113

 

 

171,455

 

 

116,867

 

Loss on disposal or impairment of assets, net

 

5,954

 

 

3,111

 

 

17,976

 

 

2,144

 

Operating Income

 

36,316

 

 

30,115

 

 

25,531

 

 

77,635

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

Equity in earnings (loss) of unconsolidated entities

 

501

 

 

(265

)

 

790

 

 

(257

)

Interest expense

 

(46,935

)

 

(45,017

)

 

(90,896

)

 

(84,894

)

Gain on early extinguishment of liabilities, net

 

13,747

 

 

 

 

33,102

 

 

 

Other income, net

 

1,585

 

 

183

 

 

2,620

 

 

1,193

 

Income (Loss) From Continuing Operations Before Income Taxes

 

5,214

 

 

(14,984

)

 

(28,853

)

 

(6,323

)

INCOME TAX BENEFIT (EXPENSE)

 

774

 

 

(640

)

 

1,075

 

 

(319

)

Income (Loss) From Continuing Operations

 

5,988

 

 

(15,624

)

 

(27,778

)

 

(6,642

)

Loss From Discontinued Operations, net of Tax

 

(153

)

 

(185,742

)

 

(1,639

)

 

(186,685

)

Net Income (Loss)

 

5,835

 

 

(201,366

)

 

(29,417

)

 

(193,327

)

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

(168

)

 

129

 

 

(219

)

 

397

 

NET INCOME (LOSS) ATTRIBUTABLE TO NGL ENERGY PARTNERS LP

 

$

5,667

 

 

$

(201,237

)

 

$

(29,636

)

 

$

(192,930

)

NET LOSS FROM CONTINUING OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

 

$

(17,933

)

 

$

(32,561

)

 

$

(73,748

)

 

$

(152,687

)

NET LOSS FROM DISCONTINUED OPERATIONS ALLOCATED TO COMMON UNITHOLDERS

 

$

(152

)

 

$

(185,556

)

 

$

(1,637

)

 

$

(186,498

)

NET LOSS ALLOCATED TO COMMON UNITHOLDERS

 

$

(18,085

)

 

$

(218,117

)

 

$

(75,385

)

 

$

(339,185

)

BASIC LOSS PER COMMON UNIT

 

 

 

 

 

 

 

 

Loss From Continuing Operations

 

$

(0.14

)

 

$

(0.26

)

 

$

(0.57

)

 

$

(1.21

)

Loss From Discontinued Operations, net of Tax

 

$

 

 

$

(1.46

)

 

$

(0.01

)

 

$

(1.47

)

Net Loss

 

$

(0.14

)

 

$

(1.72

)

 

$

(0.58

)

 

$

(2.68

)

DILUTED LOSS PER COMMON UNIT

 

 

 

 

 

 

 

 

Loss From Continuing Operations

 

$

(0.14

)

 

$

(0.26

)

 

$

(0.57

)

 

$

(1.21

)

Loss From Discontinued Operations, net of Tax

 

$

 

 

$

(1.46

)

 

$

(0.01

)

 

$

(1.47

)

Net Loss

 

$

(0.14

)

 

$

(1.72

)

 

$

(0.58

)

 

$

(2.68

)

BASIC WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

 

128,771,715

 

 

126,979,034

 

 

128,771,715

 

 

126,435,870

 

DILUTED WEIGHTED AVERAGE COMMON UNITS OUTSTANDING

 

128,771,715

 

 

126,979,034

 

 

128,771,715

 

 

126,435,870

 

EBITDA, ADJUSTED EBITDA AND DISTRIBUTABLE CASH FLOW RECONCILIATION

(Unaudited)

The following table reconciles NGL’s net income (loss) to NGL’s EBITDA, Adjusted EBITDA and Distributable Cash Flow:

 

 

 

Three Months Ended September 30,

 

Six Months Ended September 30,

 

 

2020

 

2019

 

2020

 

2019

 

 

(in thousands)

Net income (loss)

 

$

5,835

 

 

$

(201,366

)

 

$

(29,417

)

 

$

(193,327

)

Less: Net (income) loss attributable to noncontrolling interests

 

(168

)

 

129

 

 

(219

)

 

397

 

Net income (loss) attributable to NGL Energy Partners LP

 

5,667

 

 

(201,237

)

 

(29,636

)

 

(192,930

)

Interest expense

 

46,840

 

 

45,113

 

 

90,906

 

 

85,023

 

Income tax (benefit) expense

 

(827

)

 

650

 

 

(1,128

)

 

339

 

Depreciation and amortization

 

86,822

 

 

63,266

 

 

170,024

 

 

118,110

 

EBITDA

 

138,502

 

 

(92,208

)

 

230,166

 

 

10,542

 

Net unrealized losses (gains) on derivatives

 

4,457

 

 

(5,462

)

 

31,128

 

 

(8,936

)

Inventory valuation adjustment (1)

 

(1,641

)

 

(5,439

)

 

2,179

 

 

(25,185

)

Lower of cost or net realizable value adjustments

 

(1,531

)

 

(901

)

 

(33,534

)

 

(1,819

)

Loss on disposal or impairment of assets, net

 

6,063

 

 

177,561

 

 

19,147

 

 

176,594

 

Gain on early extinguishment of liabilities, net

 

(13,747

)

 

 

 

(33,102

)

 

 

Equity-based compensation expense (2)

 

2,256

 

 

21,295

 

 

4,558

 

 

24,996

 

Acquisition expense (3)

 

169

 

 

5,085

 

 

326

 

 

7,176

 

Other (4)

 

3,253

 

 

3,332

 

 

7,601

 

 

6,655

 

Adjusted EBITDA

 

$

137,781

 

 

$

103,263

 

 

$

228,469

 

 

$

190,023

 

Adjusted EBITDA – Discontinued Operations (5)

 

$

(190

)

 

$

(20,203

)

 

$

(484

)

 

$

(37,161

)

Adjusted EBITDA – Continuing Operations

 

$

137,971

 

 

$

123,466

 

 

$

228,953

 

 

$

227,184

 

Less: Cash interest expense (6)

 

43,568

 

 

42,712

 

 

83,967

 

 

80,487

 

Less: Income tax (benefit) expense

 

(774

)

 

640

 

 

(1,075

)

 

319

 

Less: Maintenance capital expenditures

 

6,830

 

 

16,461

 

 

15,998

 

 

33,390

 

Less: Preferred unit distributions paid

 

15,108

 

 

5,796

 

 

30,138

 

 

18,872

 

Less: Other (7)

 

 

 

127

 

 

 

 

127

 

Distributable Cash Flow – Continuing Operations

 

$

73,239

 

 

$

57,730

 

 

$

99,925

 

 

$

93,989

 

(1)

Amount reflects the difference between the market value of the inventory at the balance sheet date and its cost, adjusted for the impact of seasonal market movements related to our base inventory and the related hedge position. See “Non-GAAP Financial Measures” section above for a further discussion.

(2)

Equity-based compensation expense in the table above may differ from equity-based compensation expense reported in the footnotes to our unaudited condensed consolidated financial statements included in the Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Amounts reported in the table above include expense accruals for bonuses expected to be paid in common units, whereas the amounts reported in the footnotes to our unaudited condensed consolidated financial statements only include expenses associated with equity-based awards that have been formally granted.

(3)

Amounts represent expenses we incurred related to legal and advisory costs associated with acquisitions, including Mesquite during the three months and six months ended September 30, 2019.

(4)

Amounts for the three months and six months ended September 30, 2020 and 2019 represent non-cash operating expenses related to our Grand Mesa Pipeline, unrealized losses on marketable securities and accretion expense for asset retirement obligations.

(5)

Amounts include the operations of TPSL, Gas Blending and Mid-Con.

(6)

Amounts represent interest expense payable in cash for the period presented, excluding changes in the accrued interest balance.

(7)

Amounts represents cash paid to settle asset retirement obligations.

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